HS Codes 2022 Updates, Challenges & Solutions For eCommerce Businesses

WCO (World Customs Organization) established the HS codes list to help standardize the classification of goods traded globally. The codes help determine the international trade statistics which serve as a basis for businesses to stay internationally competitive. More than $19 trillion of goods are sold worldwide due to the consistent framework created by the HS codes. This blog aims to look at the latest HS codes 2022 revisions, and how it impacts the eCommerce industry.

HS Codes are reviewed elaborately and tenaciously every five years to corroborate that the system is on par to accommodate the changing technological system, booming product market, current trends, etc. The changes made are based on technological advancement, the progression of new product tendencies and merchandise models, environmental challenges, health, and precautionary/safety issues, anti-terrorism, and borders security.

The latest update has around 300 amendments  with 12% of the EU codes being influenced. Though the timeline for implementation globally has been set as January 1st, 2022, the migration for most countries is expected to take atleast 6 months. Let’s look at the top headlines of HS 2022 amendments:

• Visibility of evolving product streams and changing trade patterns: Here, new chapters and headings have been added. This will help recognize the sales model for smartphones, drones, flat panel displays, nicotine products, novel tobacco, etc.
• Environmental challenges: To assist countries in their support for the Basel Convention which aims at sustainable development, specific terms are brought in for categorization electronic goods and outflux of waste.
• Anti-Terrorism Fight & Borders Security: Here for the case of dual-use goods new sub-headings have been added to ensure authorization of goods that could be side-tracked. Examples include radioactive materials, components of improvised explosive products, etc.

Currently, HS codes for products can also be found extensively in electronic messages in EDIFACT. This has seamlessly integrated the ability to consistently describe products across eCommerce platforms.

The new edition of HS codes will result in custom clearance problems unless retailers, marketplaces, and their logistic partners do not enter accurate and authentic commodity data. The new HS 2022 edition introduced over 370 new HS codes and more than 100 deletions, covering a wide range of goods across industries. Furthermore, the advent of the pandemic has accelerated the need for optimum cross-border eCommerce solutions.

Four main challenges were noticed in the current cross-border eCommerce, thanks to the 2022 HS codes edition, they are listed as follows:

1. The synchronization by manufacturers across marketplaces regarding the updated product information. Retailers will also have to collect the new shipping code information to avoid business downturns.
2. Managing large amounts of HS code data within a short time internally can be expensive and lead to errors. Therefore, having a product classification system can optimize data-related tasks.
3. Manually updating the HS code of a product can be risky and also reduce the time to market. Not aligning the codes accurately can lead to shipping delays which can lead to a high customer churn rate and a dip in your international sales. 
4. The updation of HS codes will also lead to a change in duty tariffs on imported goods. Therefore, knowing your up-to-date HS code is important for duty compliance.

In India, the Ministry of Commerce tightened the rules surrounding the classification of HS codes. This is because the misclassification of goods helped camouflage the actual cost of import. It also would lead to the import of low-quality goods. The Directorate General of Foreign Trade also flagged the importance of specifying the 8-digit codes when filing the bill of entry at the time of import. 

How can you get ready?

The regulatory changes can make it increasingly difficult to accommodate all the revisions for your products. In order to stay ahead of the curve, in the emerging market of eCommerce, it is important to harness powerful AI-driven, real-time data solutions. With Avalara as your cross-border solution partner, you can easily map and correlated the latest changes in HS codes.

Check out the detailed breakdown of the HS 2022 codes here